Demand Tariffs in Australia – How to tackle them

If you hear the words ‘Demand Tariffs’ and start scratching your head, don’t worry, you’re not alone. In this article, we’ll break it down for you so you know where you stand with your energy retailer.

Your tariff is the amount charged for providing energy under your contract. It includes both fixed and variable charges.

Normally, costs of energy are determined based off a flat tariff, and you are charged with a flat rate based on peak, shoulder or off-peak periods. However, in some energy contracts, the costs can be based on the energy demand.

This is applicable for some residential consumers (depending on the energy retailer) and large businesses (where consumption is more than 100MWh in a year). South Australia and NSW have introduced demand tariffs for residential consumers.

In a demand tariff, the user is usually charged for:

The maximum demand during the billing interval (usually at a particular 15 or 30-minute interval of highest demand)

The amount of kWh (or amount of energy) that you actually use

The price you pay for energy is, in this case, mostly influenced by the highest demand of energy you use at a particular point in time.

But what does demand mean?

Demand is the rate of energy being used and is measured in kilovolt-amps(kVA) – in the same way that the speed of a car is a rate not the actual amount of distance traveled. If you turn on energy hungry appliances, the demand is high at that point in time so kVA will spike (see image below).

The amount of energy used is measured in kilowatt-hours (kWh). Usually, residents pay for how much energy they use.

With demand tariffs, you don’t just get charges for the electricity you use, you also get a capacity charge, based on the peak amount of power you draw from the grid.

Demand tariff charges

To tackle this, you have to be aware of how much energy your household uses and when. Knowing when your peak hours are and what appliances are on is key. This enables you to stagger out the appliances so they are not all competing for electricity at the same time (see image).

But you can’t manage what you don’t measure. Finding out the demand charges at the end of the billing cycle doesn’t show your daily use or let you adapt in real-time. Energy management systems (like carbonTRACK) allow you to see your energy profile and demand, which lets you adapt in real – time and stagger energy hungry appliances during the day.